Buying a home will likely be one of
the biggest purchases of your life. Having a knowledgeable real estate agent to
walk you through the process is imperative for a smooth transaction. This is
especially true if you’re purchasing with a VA home loan.

VA mortgages come with a host of
benefits, including no down payment, low interest rates, and no private
mortgage insurance. Along with these benefits come some unique loan
requirements. Here are three key reasons why using a military-friendly real
estate agent benefits VA home buyers.

1. They understand
the unique needs of VA home buyers

Active-duty service members relocate
frequently. When receiving permanent change of station (PCS) orders, service
members receive 10 days of leave to scope out the new duty station and complete
a home search. Choosing an agent who understands this short time frame and can
dedicate the time necessary to find a home during this compressed period of
time is essential.

Due to frequent relocations, it’s
also important for agents to understand the importance of
strong resale value. Agents who work with active-duty service members
understand they’ll need to identify a home that not only fits the service
member’s current needs. The agent also needs to make sure the home
has the potential for a quick and profitable resale if the service member
receives PCS orders again.

2. They’re
passionate about serving those who’ve served

Agents who identify as
military-friendly frequently have a passion for serving those who’ve served.
Some have served themselves, others have close ties to someone who has, and
others simply have a desire to give back to those who’ve given so much for our
country.

They’re also passionate about
educating veterans and service members about VA home loan benefits. Many of
these agents now ask every buyer “Did
You Serve” so they can identify buyers who may be eligible for a VA
loan.

3. They understand
the unique requirements of the VA loan

The Department of Veterans Affairs
has created a few unique requirements for VA loans, to ensure buyers purchase
homes that are a solid investment. The VA established a set of
minimum property requirements (MPRs) to ensure all homes purchased by veterans
and service members are safe, sanitary, and structurally sound.

VA appraisers are tasked with the
responsibility of outlining any features not meeting the MPRs, and any
issues will likely have to be fixed prior to closing. An agent who’s
worked with VA buyers and understands MPRs is a great asset when doing
a walk-through on a potential property—he or she can point out possible
MPR issues before going under contract.

Home-Buying
Benefits for Veterans & Military Buyers

Veterans, service members, and their
families believe in homeownership. In fact, the homeownership rate among
veterans far outpaces that of civilians.

But the financial toll of military
service can make it tough for some veterans to get a financial foothold, let
alone land a home loan.

The good news is those who serve have
access to a host of home-buying benefits and protections, from what’s arguably
the most powerful home loan on the market to financial safeguards and more.

Let’s take a closer look.

VA loan program

Since the VA loan program’s inception
in 1944, the Department of Veterans Affairs has backed more than 21 million
loans for veterans, active-duty military members, and their spouses. This
program has made buying a home more accessible to those who most deserve the
American dream they helped build and protect.

VA loans feature many benefits that
help make home buying possible, including the following:

No down payment requirement

No mortgage insurance

Lower average interest rates

Limits on closing costs

More lenient credit requirements

VA home loans have boomed in recent years,
attracting many veterans and military members who may not qualify for
conventional loans, which have stricter credit requirements.

Still, many eligible buyers are
unaware of the benefits of VA home loans and the protections they offer. Some buyers also make the mistake of assuming a
government-backed loan comes with endless red tape and miss an opportunity to
benefit.

Typically, veterans and active-duty
service members are eligible for a VA home loan if they served in the following
capacity:

90 consecutive days on active duty during
wartime

181 consecutive days on active duty during
peacetime

6 or more years in the National Guard or
Reserves

Some spouses of military members who
died in the line of duty or of a service-related disability may also be
eligible for a VA loan.

Talk with a VA Lender about obtaining
your Certificate of Eligibility and getting a sense of your purchasing power.

Occupancy &
power of attorney

VA loans are focused on getting
buyers into homes they’ll live in full time. But the program makes exceptions
for some veterans and active-duty service members.

For example, a spouse or children may
be able to fulfill the occupancy requirement on behalf of a VA buyer. Also, a
VA buyer who is deployed or otherwise unable to manage the loan process can
typically assign a power of attorney to a spouse or family member to manage the
loan process and sign documents.

There are two types of power of
attorney, general and specific. The type needed depends in part on what
loan-related documents the VA buyer can sign.

The occupancy and power of attorney
options mean an eligible VA buyer’s spouse and children could buy a home during
a deployment or unaccompanied assignment, helping alleviate the emotional toll
of multiple moves on military families.

Basic allowance for
housing

Many active-duty military members who
receive a monthly housing allowance are surprised to learn that they can use
this money to qualify for a home loan. Lenders can count Basic Allowance for Housing
(BAH) as effective income. That can help service members make the leap from
renting to owning, especially in higher-cost areas.

BAH is based on several factors,
including the location of your duty station, your pay grade, and your family
size. The housing allowance can change on an annual basis. To calculate your
BAH, refer to the BAH calculator on the Defense Department’s website.

Financial
protections

Even after becoming homeowners,
active-duty service members can face unique financial challenges. Deployment
and changes of station can strain a family emotionally and financially.

The Service members Civil Relief Act
(SCRA) provides active-duty military personnel and their families financial
protection involving interest rates, income tax payments, eviction,
foreclosure, and more.

For example, military personnel can
ask creditors—including their mortgage lender—to cap their interest rate at 6%
during their term of service. The SCRA also forces lenders and servicers to
seek a court order to foreclose on active-duty military members during their
time of service and up to nine months afterward.

Veterans Affairs also offers
foreclosure avoidance protection assistance for homeowners. The VA has a team
of experts who work with lenders and servicers on behalf of struggling
homeowners to find alternatives to foreclosure. Their efforts have helped
nearly 500,000 veterans and service members avoid foreclosure in the past six
years alone.

Understand
Your Loan Options

Veterans United

Qualified veterans and military
buyers can tap into what’s become the most powerful home loan on the market. VA
loans feature no down payment, no mortgage insurance, and more forgiving credit
requirements than most other loan types.

Still, they’re not the best fit for
every veteran. The key is to find the right home loan for you.

Getting a better understanding of all
your home loan options can help you make the best financial decision. Let’s
take a closer look at the four major types of home loans.

VA loans

Who can use it: Eligible veterans, active-duty military
members, and qualified surviving spouses. The VA doesn’t set a credit
score benchmark, but most lenders will have one. A 620 FICO score is a
common minimum.

What it’s all about: VA home loans are backed by the government but
issued by private lenders. VA loans offer no down payment requirements, no
mortgage insurance, and looser credit requirements. VA loan guidelines
account for borrowers whose finances may have been affected by their
service. Credit score requirements are typically lower than those for
conventional loans, and the program allows for more wiggle room when it
comes to debt-to-income ratios, credit scores, and assets. They also tend
to have lower average interest rates than other loan types.

What to watch out for: The VA loan program is designed to help
veterans and military members purchase safe, structurally sound homes
they’ll occupy as their primary residence. VA loans are not available for
investment properties or vacation homes. A funding fee of no more than
3.3% of the loan amount helps keep the program going and can be paid
upfront or rolled into your loan amount. Buyers who receive compensation
for a service-connected disability don’t have to pay this fee.

FHA loans

Who can use it: Anyone with at least a 580 FICO score (or
lower in special cases), adequate income, and at least 3.5% down may be
eligible to use an FHA loan.

What it’s all about: Much like the VA program, the FHA program
helps increase access to homeownership through lower down payment options,
competitive interest rates, and less rigorous underwriting guidelines. FHA
loans also tend to have the lowest minimum credit score requirements of
all the loan types. Depending on their individual approval guidelines,
some lenders will even allow for exceptions to the minimum credit
requirement. The FHA’s 203(k) program allows borrowers to purchase and
repair fixer-uppers, lending based on a home’s projected value after rehab
work is completed.

What to watch out for: FHA buyers pay both an upfront funding fee
(called a mortgage insurance premium) as well as an annual mortgage
insurance charge. The latter can easily add $150 or more to your monthly
mortgage payment, and it’s a cost FHA buyers now pay for the life of their
loan, regardless of their equity status.

USDA loans

Who can use it: Buyers looking to settle in an approved rural
area who have adequate (but not excessive) income and an acceptable credit
score can use the USDA loan program. USDA lenders often look for at least
a 640 FICO score.

What it’s all about: Much like the VA loan, the USDA program allows
qualified buyers to purchase a primary residence with no money down.
USDA-eligible homes are located in what the agency deems qualified rural
areas. Buyers need to verify that a property is located in one of these
eligible areas. Along with no down payment, another big benefit of USDA
loans is that buyers can finance their closing costs.

What to watch out for: USDA puts a cap on income for eligible
borrowers. These limits vary by region and family size and can change
annually. Like FHA loans, USDA loans come with both an upfront mortgage
insurance premium and an annual mortgage insurance fee.

Conventional loans

Who can use it: Anyone with qualifying credit (in the
ballpark of a 660 FICO or higher), adequate income, and a 5% down payment
in most cases. Some lenders may offer conventional financing with just 3%
down.

What it’s all about: In terms of credit scores and debt-to-income
ratios, these loans have higher barriers to entry than the
government-backed options. Conventional lenders are looking for borrowers
who have well-established credit, solid assets, and steady income. The
upside is that when it comes to the kind of property you can purchase,
you’ll have more freedom with conventional financing. That means you can
use this type of loan to buy a second home or an investment property.

What to watch out for: Buyers putting less than 20% down will pay
PMI, or private mortgage insurance, until they build sufficient equity in
the property. These fees can easily add $100 or more to your payment every
month. Unless you have excellent credit—think 740 or above—a conventional
loan may come with higher rates and fees

The 5 Biggest
Mistakes Veteran and Military Home Buyers Make

Having a place to call your
own—whether you’re going to be there for four years or forever—is an essential
part of the American dream. The U.S. Department of Veterans Affairs offers
plenty of great programs to help those who have served in the military get
there, but the process isn’t foolproof. People can (and do) make mistakes
buying their first home, second home, or 10th home.

You can avoid your own tale of woe
(or head-banging frustration) by avoiding those mistakes before you start your
home search. We asked VA-savvy Realtors® to tell us which missteps they see the
most—and how you can do the whole thing correctly right from the start.

Mistake No.1: Not
getting a Realtor who knows VA loans

If you’re getting a VA loan, make
sure you work with a Realtor who understands the process.

“I see a lot of people go with an
agent who doesn’t understand the VA system,” says Renee Lambert, a Realtor
with RE/MAX Town & Country in West Chester, PA. “The VA won’t underwrite
[just] any house. It is a huge, huge, huge deal to use an agent who understands
the VA system, the VA appraisal process, and what that all really looks like.”

When you’re buying through the VA,
you’ll need to find a home that meets VA property requirements. A VA appraiser
will have specific criteria; for instance, fixer-uppers (and even some
newer homes) won’t qualify. Save yourself the headache of making an offer on a house
that may not get approved.

Mistake No. 2: Not
communicating with your lender

Veterans have access to arguably the
most powerful mortgage option on the market, but about one in three home-buying
veterans don’t know they have a home loan benefit, according to the VA. When
you first meet with your lender, be sure to discuss your military status
so you can be informed about all the potential advantages.

One of the biggest benefits you’ll
get with a VA loan is the ability to buy with 0% down (yes, we’re totally
serious). VA loans also come with low-interest rates, don’t require mortgage
insurance, and have more forgiving credit requirements.

“Veterans should ask their lender if
they offer any incentives for veterans,” adds Stephen Rinaldi, broker
with Central Lending in Yardley, PA. “I’ve seen lenders waive appraisal fees,
offer a waiver of origination fee if the veteran has a certain credit score, or
other lender credits.”

That’s right—pretty much everything
will get easier as soon as your lender knows your military status, so
speak up!

Mistake No.
3: Forgetting about all the home-buying costs

While you’ll have a ton of financial
advantages with your VA loan, you will have some costs to deal with.

“Probably the biggest mistake I see
is active-duty members coming into the home-buying process and not knowing
there are other costs and fees necessary for buying a home,” Rinaldi says.

When you’re buying a home, you’ll
likely have to plunk down a bit of cash for things like a home appraisal and
inspection. It might not cost much in the large scheme of things, but it’ll
help speed things along if you come prepared knowing what you’ll have to shell
out for.

Mistake No. 4: Not
thinking of your home as an investment

Maybe you think there’s no sense in buying
if there’s a chance you might be relocated in the next few years. But that
doesn’t mean you shouldn’t buy; in fact, that home could end up being a smart
investment.

By searching in
high-demand areas or choosing a popular home style and size (like 1,500 to
2,000 square feet), you’ll give yourself a better chance at resale if you
need to move later. Or, you can hang on to it and rent it out.

“[My clients and I] often go out and
look for their first rental home, not just a home for their family,” Lambert
says. “With so many in transition, they’re able to purchase a home and it
becomes an investment property for them when they go on to their next duty
station or they move.”

Don’t like the idea of becoming a
landloard? A VA loan is assumable (meaning
you can transfer the loan and the property to another vet), or you can just
sell the home to a nonmilitary buyer. And
don’t forget: You can use your VA home loan benefits again and again, so you
can own a rental property and a new home.

Mistake No.
5: Making other big purchases before closing

Once you’ve found a home and your
offer is accepted, you’ll probably be excited to just move in already and make
it yours. Maybe you have an eye on a new big-screen TV, and
you’re looking into financing a new living room set you love.
But don’t do that yet.

“Opening a line of credit or making a
big purchase after loan approval is a common mistake,” Rinaldio says. “This can
oftentimes change the veteran’s credit score and make them ineligible for the
loan.”

Wait until after closing to make any
other financial moves, just to be on the safe side.